Joint and several liability

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Lua error in package.lua at line 80: module 'strict' not found. Where two or more persons are liable in respect of the same liability, in most common law legal systems they may either be:

  • jointly liable, or
  • severally liable, or
  • jointly and severally liable.

Joint liability

If parties have joint liability, then they are each liable up to the full amount of the relevant obligation. So if a married couple takes a loan from a bank, the loan agreement will normally provide that they are to be "jointly liable" for the full amount. If one party dies, disappears or is declared bankrupt, the other remains fully liable. Accordingly, the bank may sue all living co-promisors for the full amount. However, in suing, the creditor has only one cause of action; i.e., the creditor can sue for each debt only once. If, for example, there are three partners, and the creditor sues all of them for the outstanding loan amount and one of them pays the liability, the creditor cannot recover further amounts from the partners who did not contribute to the liability.

Several liability

The converse is several or proportionate liability, where the parties are liable for only their respective obligations. A common example of several liability is in syndicated loan agreements, which will normally provide that each bank is severally liable for its own part of the loan. If one bank fails to advance its agreed part of the loan to the borrower, then the borrower can sue only that bank, and the other banks in the syndicate have no liability.

Joint and several liability

Under joint and several liability or all sums, a claimant may pursue an obligation against any one party as if they were jointly liable and it becomes the responsibility of the defendants to sort out their respective proportions of liability and payment. This means that if the claimant pursues one defendant and receives payment, that defendant must then pursue the other obligors for a contribution to their share of the liability.

Joint and several liability is most relevant in tort claims, whereby a plaintiff may recover all the damages from any of the defendants regardless of their individual share of the liability. The rule is often applied in negligence cases, though it is sometimes invoked in other areas of law.

In the United States, 46 of the 50 states have a rule of joint and several liability, although in response to "tort reform" efforts, some have limited the applicability of the rule. About two dozen have reformed the rule, with several (Alaska, Arizona, Kansas, Utah, Vermont, Oklahoma, and Wyoming) abolishing. In some instances it is abolished except where the defendants "act in concert".[1]

Examples

If Ann is struck by a car driven by Bob, who was served alcohol in Charlotte's bar (and the state has dramshop laws), then both Bob and Charlotte may be held jointly liable for Ann's injuries. The jury determines Ann should be awarded $10 million and that Bob was 90% at fault and Charlotte 10% at fault.

  • Under proportionate liability, Bob would have to pay $9M and Charlotte would have to pay $1M. If Bob does not have any money, Ann only gets the $1M from Charlotte.
  • Under joint and several liability, Ann may recover the full damages from either of the defendants. If Ann sued Charlotte alone, Charlotte would have to pay the full $10M despite only being at fault for $1M. Charlotte would then either have to join Bob as defendant in Ann's suit against her or would have to pursue a separate action against Bob for $9M. Regardless of the outcome of that action, Charlotte would remain liable to Ann for the full $10M.

In a Wisconsin case (Zimmer v. City of Milwaukee), an uninsured driver of a car with faulty brakes hit and killed a six-year-old boy at a school crossing. The school crossing had a stop sign and a crossing guard. The plaintiff lawyer argued that the accident might have been avoided if the crossing guard, instead of signalling the car to stop, had attempted to get the child out of the car's path. The city (the crossing guard's employer) was found to be one percent at fault. Under proportionate liability (sometimes also called comparative negligence), the city would only have been liable for their one percent of the damages. However because the driver was uninsured (and thus insolvent), the city had to pay 100% of the damages.

In a Florida case,[2] involving an injury on the Grand Prix bumper-car ride at Walt Disney World, the jury found the plaintiff 14% responsible for her own injury, her then-fiance to be 85% responsible (he rammed his car into the back of hers) and the Disney Corporation to be only 1% liable for the injury. The court ordered Disney to pay 86% of the damages - its percentage plus the husband's percentage - because the husband was unable to pay his portion.

Arguments for and against joint and several liability

Joint and several liability is premised on the theory that the defendants are in the best position to apportion damages amongst themselves. Once liability has been established and damages awarded, the defendants are free to litigate amongst themselves to better divide liability. The plaintiff no longer needs to be involved in the litigation and can avoid the cost of continuing litigation. As Dean Prosser observed:

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Here again is the typical case that two vehicles which collide and injure a third person. The duties which are owed to the plaintiff by the defendants are separate, and may not be identical in character or scope, but the entire liability rests upon the fact that each has contributed to the single result, and that no reasonable division can be made.[3]

Defenders of the principle of joint and several liability further argue that it protects victims from being under-compensated if one of the defendants cannot pay his or her share of proportionate liability. A tortfeasor, even if only 1% at fault, is the better party to shoulder the burden if the primarily responsible party is unable to compensate the victim fully.

Opponents of the principle of joint and several liability note that its use (instead of proportionate responsibility) has led to cases in which a party with a very minor part of the responsibility unfairly shoulders the burden of damages. The classic example is the uninsured drunk driver who injures someone; the plaintiff will sue both the insolvent drunk driver and the state highway department (or automobile manufacturer), hoping to hold the latter 1% or 2% responsible, thereby forcing them to pay the entire award. Joint and several liability, reform supporters argue, leads to lawyers searching for "deep pockets" to sue (in the expectation that they will settle rather than risk trial), even though those defendants may only be remotely related to an incident.

Richard Wehe, Assistant Chief Counsel at the California Department of Transportation, said:

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I can tell you that in many, many settlement conferences or mediations I am confronted with plaintiff's lawyer's statements that, 'I only need to establish that the state is 1% at fault and I can recover all of my economic damages.'[4]

Where a financially wealthy party can be joined as a defendant, a plaintiff has a greater chance of recovering damages than when the defendants have very limited economic resources or are financially insolvent, or "judgment proof".

Variations

As noted above, some jurisdictions have imposed limits on joint and several liability. For example,

  • In Ohio after April 2003, only defendants who are responsible for more than 50% of the tortious conduct can be held jointly and severally liable for economic losses. A defendant who is responsible but whose tortious conduct was less than 50% is only responsible for his/her share of the plaintiff's economic loss.[5] Non-economic losses (such as pain and suffering or loss of companionship) can only be assigned proportionately.[6]
  • California allows joint and several liability but only for economic damages.[7]
  • Hawaii allows joint and several liability for all economic losses but only for non-economic losses when the underlying tort is intentional, related to environmental pollution or selected other classes.[8]

Microfinance

In trying to achieve its aim of alleviating poverty, Microfinance often lends to group of poor, where each member of the group is jointly liable to each other. This means that each member is responsible for ensuring that all the other members of the group repay too. If one member fails to repay, the members of the group are also held in default. Joint liability solves the information and enforcement problems associated with credit markets by encouraging screening, monitoring, costly state verification and contract enforcement.[9][10][11]

See also

References

  1. The Rule of Joint and Several Liability. Heartland Institute.
  2. Walt Disney World v. Wood, 515 So. 2d 198 (Fla. 1987)
  3. Joint Torts & Several Liability (1939), 25 Cal. L. Rev. 413.
  4. E-mail from Richard Wehe, assistant chief counsel for tort law, Department of Transportation (May 21, 2004).
  5. R.C. 2307.11(A)(1) and (2)
  6. R.C. 2307.22
  7. Cal. Civ. Code Ann. § 1431.2
  8. http://www.capitol.hawaii.gov/hrscurrent/Vol13_Ch0601-0676/HRS0663/HRS_0663-0010_0009.HTM
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External links

  • Joint and Several Liability: 50 U.S. States [1]